The Courier-Mail

David & Libby Rise above your cri­sis

Fi­nan­cial cri­sis? It’s aw­ful, but you can work your way out of it. This is how

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YOU wouldn’t wish a per­sonal fi­nan­cial cri­sis, or PFC, on any­one. It can be so de­bil­i­tat­ing. It can feel as though your whole life is about to come crash­ing down like a house of cards.

A PFC can be trig­gered by a range of fac­tors but the most com­mon is a debt bur­den which has ca­reered out of con­trol.

But with dis­ci­pline and some hard work, there is a way out. Here’s our six-step guide to how to turn things around as quickly as pos­si­ble.

1. UN­DER­STAND THE BIG PIC­TURE

Be­fore any­thing else, draw up a list of all your as­sets and debts to get a bird’s eye view of where you’re at fi­nan­cially. Then, build a bud­get to work out where your money ac­tu­ally goes.

It’s sim­ple to do. In one col­umn list your in­come and in another pull to­gether all of your reg­u­lar and ir­reg­u­lar ex­penses.

Run a fine-toothed comb through last month’s re­ceipts and bank state­ments to make sure you’ve listed ex­penses ac­cu­rately.

2. SET SMART GOALS

If you’re in a sticky fi­nan­cial sit­u­a­tion, your main goal is prob­a­bly to get out of it as quickly as pos­si­ble, which is rea­son­able. But it’s not a fi­nan­cial goal.

A good fi­nan­cial goal has a def­i­nite dead­line and can be bro­ken down into man­age­able steps. For ex­am­ple, it’s much bet­ter to say, “I want to be rid of my credit card debt by Christ­mas, which means I need to re­pay $150 a week for the next four months”.

3. TAKE CON­TROL OF YOUR SPEND­ING…

With a bud­get and some wellde­fined goals to work to­wards, it’s time to take con­trol.

Think about your spend­ing in terms of wants and needs. Needs are non-ne­go­tiable – for ex­am­ple, you’ll al­ways need to make room for gro­ceries.

Wants are nice-to-haves such as gym mem­ber­ships, new clothes or eat­ing out, and if you’re in the midst of a PFC these should be the first things to go.

4. … AND YOUR DEBTS

First, look at whether you can min­imise the in­ter­est you’re pay­ing, for ex­am­ple through a credit card bal­ance trans­fer or by con­sol­i­dat­ing mul­ti­ple debts to re­duce the in­ter­est. Go online to Get­Credit score.com.au to find out your score then ei­ther go to your bank and get a bet­ter deal on con­sol­i­dat­ing debts into a per­sonal loan or use an al­ter­na­tive like a peer-to-peer len­der.

Next, try to chan­nel all of your ad­di­tional money into mak­ing ex­tra re­pay­ments, which will save in­ter­est and help you pay off the debts faster.

(Don’t be afraid to use your sav­ings to make ex­tra re­pay­ments. Money in the bank only earns around 3 per cent these days, while credit cards or per­sonal loans still charge in­ter­est rates in the dou­ble dig­its.)

Fi­nally, if you’re hav­ing trou­ble re­pay­ing a debt or bill, speak to your len­der or biller im­me­di­ately. They may be will­ing to ne­go­ti­ate more favourable terms and you could avoid a black

6. FU­TURE PLANS

Hope­fully, these steps help you take con­trol. But a PFC could hap­pen again, so be pre­pared. Start set­ting aside money in a sav­ings ac­count to cover un­ex­pected ex­penses. And do a full re­view of your in­sur­ance, both for things and for you and your fam­ily. This will en­sure you can weather the

next PFC if it comes.

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